Stocks Hover As Japan Denies 'Helicopter Money'; Poundland Sold

Stocks across Europe were flat on Wednesday morning in a sign that the strong rally that started the week has run out of steam. Weak trade data from China, a pullback in oil prices and disappointment that Japan will not implement “helicopter money” has damaged sentiment.

Japan’s Chief Cabinet Secretary Yoshihide Suga denied reports that Prime Minister Shinzo Abe is considering “helicopter money” as a possible policy measure. Despite all the evidence that quantitative easing and negative rates haven’t solved Japan’s deflation problem, Abe looks set to double down with his failed Abenomics program. If new monetary stimulus is not through “Helicopter money,” more QE looks in the offering given the poor reception to negative interest rates.

Some disappointing corporate trading updates from Barratt Developments (LON:BDEV) and Burberry (LON:BRBY) took the edge of trading in British blue chips. Poundland (LON:PLND) was the obvious mid-cap outperformer following its acquisition by South Africa’s Steinhoff (DE:SNHG).

Steinhoff has agreed to purchase Poundland for 220p a share. The drop in the pound against the South African rand has made the opportunity to buy up Poundland too good to pass by for Steinhoff. The South African company already owed nearly a quarter of outstanding Poundland shares so it makes sense to put in a firm offer with the exchange rate offering a healthy discount. Given the current economic uncertainty for the UK economy, a 39% premium will satisfy Poundland shareholders.

Currency markets lost their recent buzz with sterling flat ahead of tomorrow’s Bank of England rate decision and the yen strengthening moderately at the disappointment over no helicopter money.

US stocks look set for a flat open on profit-taking after the Dow Jones Industrial Average touched new record highs before the release of the Fed’s Beige book.

USA pre-opening levels
S&P 500: unchanged at 2,152
Dow Jones: 5 points lower at 18,342
Nasdaq 100: 1 point lower at 4,576

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